rohan

Intro:Kingfisher was launched as an all-economy, single-class configuration aircraft with food and entertainment systems. After about a year of operations, the airline suddenly shifted its focus to luxury. After Kingfishers plunge into luxury came its next follya merger with Air Deccan, an airline formed by Captain G R Gopinath in 2003. The fall of Kingfisher airlines started the very day when they bought Air Deccan. Capt. Gopinath, the owner of Air Deccan can be termed as shrewd but smart investor who knew when to part with his investment, just at the right time. The all-economy configuration of Air Deccan was rebranded and called Kingfisher Red, which continued to operate as its low-cost wing till recently. Kingfisher ended up spending Rs 550 crore on an airline that had losses of over Rs 550 crore. It is widely believed that Kingfisher merged itself with Air Deccan so that it could classify as an airline with five years of domestic flying in 2008, thus fulfilling requirements to fly international routes. The fact that Jet had meanwhile swallowed Air Sahara didnt help, fuelling a competitive race to be the biggest airline around. Essentially, jet fuel prices began to sky-rocket and soon touched $150. Then came the 2008 recession that made fundamentals in the airline industry worse, which is when the airline launched its international operations. Some companies just fail to learneither from the examples that its peers may have set for the industry, or from its own past mistakes. Now, Kingfisher has decided to change its model yet againdiscontinuing its Kingfisher Red brand and completely converting its fleet to a dual class, full-service configuration. Kingfisher was gifted to Mr. Sidhartha Mallya by his father on his birthday i.e. a Near Zero experience in running a company and the later CEOs appointed by Mr. Mallya couldnt bring any significant result too. His over indulgence in petty things like parties and Kingfisher Calendar also lead to inadequacies in his finances. .IPL is also one of the reason for Kingfisher downfall because it is known that most of the money was diverted to IPL from Kingfisher airlines, resulting which they defaulted in Loans and recently became a NPA (nonperforming asset) to its leading bankers like SBI. The lack of trust was shown recently when Mr Mallya asked the government of India to bail him out. The new minister Mr. Ajit Singh clearly told that the Government will not bail out private airline because Air India is itself in need to bail out. Mr Ajit Singh made a good decision because When Kingfisher doesnt give public anything in return of its profit , then why is it asking for Public hard earned money ( tax money) to bail him out.

rohan

Narendra
Here are 5 probable reasons for the downfall of Kingfisher Airlines. 1. Problem associated with the Aviation sector - Owing an Airline company can be very sexy but managing it is a very hefty task. Aviation business is one of the world's most risky businesses as the cost involved in it both capital and operational is very huge. None of the Airline Company in the world has able to make consistent profits year after year this is because of the operating problems associated with the Aviation sector. Starting from Airplanes purchasing cost, Fuel cost, maintenance cost, interest cost , salaries & wages and many other costs companies has to bear if this is not enough operational problems like weather and technical delays further worsen the condition for aviation companies all these problems makes the aviation business most vulnerable. 2. Faulty business modal of Kingfisher Airlines - Kingfisher Airlines started their proceedings as a premium player in the Indian Aviation sector but soon they stuck in the price war with competing airline companies which leads them to offer their premium services at much reduced prices to the passengers which hurt Kingfisher on both the revenue and the cost side. A luxury airline like Kingfisher was never required for Indian market where less than 1% of the population uses airlines as their mode of transportation but if Kingfisher wanted to make its premium modal a success it should never jumped into the price war and keep charging premium prices for their premium services which can give them good margins but Kingfisher mess up all.

3. Improper handling of Financials by the company's management Since its inception in 2005 Kingfisher never earned a single penny and continually increasing its losses year after year even then management of the company took no big step to reduce their cost. The ever increasing Debt is also a major worry for the company. Company's management has failed miserably in handling the financials of the airline. 4. Acquisition of Air Deccan by Kingfisher - In order to enter the 'Low cost airline' business and to get the permission to fly international Kingfisher acquired Air Deccan which is one of the major reason for the financial crisis in which Kingfisher is current in. Air Deccan was itself struggling and incurring huge loses when Kingfisher acquired it. Adding 2 negatives only increase the problems for the company. 5. Vijay Mallya's over enthusiasm killed Kingfisher Airlines - The man behind Kingfisher, Mr. Vijay Mallya himself killed Kingfisher Airline. Dr. Mallya's enthusiasm for his airline to make it best in the world leads him to over spend on the airline. Mr. Mallya is not ready to accept his airline's failure and continuously pouring money from the profits of his other ventures and by taking loans which is making conditions worsen for the Kingfisher.

Saloni Threat of New Entrants

A lucrative industry is always a target for investors looking at investment. One of the foremost factors in consideration while looking at the attractiveness of an industry is the threat of new entrants. In the airlines industry, this was a major threat a few years ago.The airlines operating in he industry were limited and the industry had few players like Indian Airlines and Jet Airways. However, as the industry had scope for accommodating more players many players joined the fray but is not the case. The airlines industry however comes with its fair share of barriers. The investment in the airlines is very huge and acts as a major barrier to entry. Bundled with it were different permits for running an airline company from the civil aviation company and FDI limits. Factors that can limit the threat of new entrants are known as barriers to entry. Some examples include: Existing loyalty to major brands Incentives for using a particular buyer (such as frequent shopper programs) High fixed costs Scarcity of resources High costs of switching companies Government restrictions or legislation

Power of Suppliers
This is how much pressure suppliers can place on a business. If one supplier has a large enough impact to affect a company's margins and volumes, then it holds substantial power. In the airlines company there is huge amount of bargaining power the supplier because more than 40% of the flying cost consists of fuel costs. Firstly, suppliers in the form of aircraft builders, who very often exceed the time limits. Adding to it are suppliers of oil who hold the key to running of the airlines. Here are a few other reasons that suppliers might have power.

 There are very few suppliers of a particular product There are no substitutes Switching to another (competitive) product is very costly The product is extremely important to buyers - can't do without it The supplying industry has a higher profitability than the buying industry

Power of Buyers
This is how much pressure customers can place on a business. If one customer has a large enough impact to affect a company's margins and volumes, then the customer holds substantial power. Predominantly, in the airlines industry, it has been seen that the civil aviation ministry has been in favour of the customer and buyers thus they have reasonable power. While most airlines companies are running with wafer thin margins, it is pretty difficult for companies to increase prices as the capacity utilization will be seriously affected. Keeping Indian markets in mind prices play a major role, Indians prefer low cost carriers more than high priced.

Here are a few reasons that customers might have power: Highly money minded buyers of buyers Purchases large volumes Switching to another (competitive) airline is simple Swiching to other transportation facilities(trains & busses) The airline is not extremely important to buyers; they can do without the same brand for a period of time Customers are highly price sensitive

Saloni

RAHIJ
Availability of Substitutes
What is the likelihood that someone will switch to a competitive product or service? Ifthe cost of switching is low, then this poses a serious threat. Most airline companies have similar facilities and are listed on website such as makemytrip.com, yatra.com where customers choose from the cheapest available tickets. This shows that the customer has alot of options and would not mind shifting to a new service. Hence threat of substiturte is very high Here are a few factors that can affect the threat of substitutes:-n The main issue is the similarity of substitutes. All low cost airlines have similar facilities. If substitutes are similar, it can be viewed in the same light as a new entrant.

Competitive Rivalry
This describes the intensity of competition between existing firms in an industry. Highly competitive industries generally earn low returns because the cost of competition is high. The competition in the airline industry is cutthroat and each player is trying to gain an upperhand based on non price factors. A highly competitive market might result from: Many players of about the same size; there is no dominant firm Little differentiation between competitors products and services A mature industry with very little growth; companies can only grow by Stealing customers away from company.

RAHIJ